Cairn surprise about-turn on Palar block wells

Until recently it was widely believed Cairn India patriarch Anil Agarwal had abandoned any initiative to drill expensive exploration wells in a knee-jerk reaction to low oil prices.

But that assumption is no more as Cairn accelerates plans to drill the first of three Phase-I exploration wells at east coast Palar basin block PR-OSN-2004/1 beginning April next year (2017). Confident of success, Cairn has applied for CRZ (Coastal Regulatory Zone) clearance to drill 10 exploration/appraisal wells in a June 10 letter to the environment ministry.

"[This] includes exploration wells and upon success appraisal and development wells," confirms Cairn. "Any regulated activity within 12 nautical miles from the coastline requires CRZ clearance." In its letter Cairn adds: "The distance of the hydrocarbon leads from the Andhra Pradesh shoreline is between 10 to 22-km." Cairn's decision to fulfil its three-well commitment is a victory for partners Tata Petrodyne and ONGC who were sharply critical of its earlier reluctance and with it the prospect of heavy penalties.

"Cairn earlier wanted to postpone drilling because of low oil prices," confirms a consortium source. "But it has agreed to go ahead; tenders should be floated anytime now because a [jack-up] rig needs to be mobilised by April (2017)." How long does CRZ clearance take? "Depending on the studies," adds Cairn, "anywhere between six to 12 months." If the latter, don't expect first drilling before June 2017.

Cairn's decision to proceed at PR-OSN-2004/1 is all the more astonishing after it emerged in a list of three assets the company wanted to offload to ONGC disclosed in a letter from former chief Mayank Ashar to chairman DK Sarraf on August 8 last year (2015). Cairn's decision was undoubtedly prompted by the discovery three years after it signed a PSC on March 2, 2007 that 40% of the block's original 9416-sq km area falls in the flight path of Indian space rockets. Force Majeure was promptly declared and only revoked in 2015 after a meeting of the government's high-level Empowered Committee of Secretaries on December 31, 2014 granted Cairn a 30-month 'Special Dispensation' to continue work. By then the consortium had already spent $40m on 3125-lkm 2D and 800-sq km 3D. Water depths at PR-OSN-2004/1 range up to 500 metres but between 30 to 100 metres at the prospective drilling locations, according to the Environmental Impact Assessment prepared in November 2010.

Cairn's decision to proceed at PR-OSN-2004/1 is all the more astonishing after it emerged in a list of three assets the company wanted to offload to ONGC disclosed in a letter from former chief Mayank Ashar to chairman DK Sarraf on August 8 last year (2015). Cairn's decision was undoubtedly prompted by the discovery three years after it signed a PSC on March 2, 2007 that 40% of the block's original 9416-sq km area falls in the flight path of Indian space rockets. Force Majeure was promptly declared and only revoked in 2015 after a meeting of the government's high-level Empowered Committee of Secretaries on December 31, 2014 granted Cairn a 30-month 'Special Dispensation' to continue work. By then the consortium had already spent $40m on 3125-lkm 2D and 800-sq km 3D. Water depths at PR-OSN-2004/1 range up to 500 metres but between 30 to 100 metres at the prospective drilling locations, according to the Environmental Impact Assessment prepared in November 2010.